Restriction on sideways loss relief for partners

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Restriction on sideways loss relief for partners
  • Non-active partners
  • Limited partners
  • Limited liability partnerships

Targeted anti-avoidance legislation tackles schemes which exploit relief for trading losses from partnerships, which individuals can claim against their other income or gains. These reliefs are referred to as ‘sideways loss reliefs’.

ITA 2007, ss 103–114

In addition to these anti-avoidance rules, there are also two other limits that must be remembered:

  • the general annual limit of £25,000 for each tax year for sideways loss relief claims ― claims for sideways loss relief that can be claimed by limited or non-active partner cannot exceed this limit (note, this limit does not apply to corporate partners)
  • the general loss relief limit of £50,000 and 25% of adjusted net income ― all individual taxpayers (not just partners) are subject to this limit which applies after any other restrictions as outlined above have been made; for further information, see the Trading losses ― cap on unlimited income tax reliefs guidance note (ITA 2007, s 24A)

ITA 2007, s 103C

For further details, see Simon’s Taxes B7.522 (subscription sensitive).

Non-active partners

Sideways loss relief is restricted in the first four years of trading for ‘non-active’ partners in a general partnership or limited

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